Why Doesn't the US Just Default?

[San Lumen]

I don't understand why the United States keeps borrowing money. We constantly spend more than we take in and never pay back what we owe and go further and further into debt. If we keep borrowing we will end up like Greece and default.

If the the company I work for ran its finances like the government we would be bankrupt very quickly. Many people also have to choose between paying rent and eating. No one should have to make that choice yet the government borrows money like it grows on trees.

If the government can just borrow money and never have to pay it back why bother having income tax? Or why not just print all the money we need?

Also US Treasury debt is viewed as a risk free asset and no one ever believed the United States wouldn't pay its debts and the world financial infrastructure is based around it. This is stupid. No investment should be risk free. The rest of the world uses the United States as a piggy bank because there is no risk involved. Why would having risk involved in treasury bonds be a bad thing?

The United States should stop spending so much money and not raise the debt ceiling the next time it comes up and start cutting things we don't need like ridiculous defense budgets and useless scientific research and other things. If it were up to me I would default on the debt not pay our interests payments and start running the country with tax revenue alone and introduce risk into Treasury Bonds. The global economy and financial system wouldn't be so intertwined anymore and we would go back to simpler time. Plus if the US defaulted it would likely wallop financial markets worldwide and trigger other sovereign debt defaults and end the world's addiction to debt.

Your thoughts NSG?

[Benuty]

First off a country is by no means a corporation, and there are people who actually count on that debt (other nations). The debt ceiling itself is a moronic idea since it forces us to go through this issue over, and over again.

[San Lumen]

First off a country is by no means a corporation, and there are people who actually count on that debt (other nations). The debt ceiling itself is a moronic idea since it forces us to go through this issue over, and over again.

Why is it a moronic idea? And how to other nations count on our debt?

[Souseiseki]

who cares about your company? the government is not a company. it is not a household either. stop comparing it to them.

it would really really really piss everyone off btw

[Dushan]

Extremly bad consequences for international finance system likely.

If the situation gets worse enough they might do it. States are egoistical. Oh and Historically, most States had debts somehow, somewhere...

[Benuty]

First off a country is by no means a corporation, and there are people who actually count on that debt (other nations). The debt ceiling itself is a moronic idea since it forces us to go through this issue over, and over again.

Why is it a moronic idea? And how to other nations count on our debt?

If we default it would essentially be economic suicide for both us, and other nations.

The debt ceiling allows the government to be held hostage on certain issues.

[Souseiseki]

Extremly bad consequences for international finance system likely.

If the situation gets worse enough they might do it. States are egoistical. Oh and Historically, most States had debts somehow, somewhere...

most people have debts somewhere. if you have a credit card, guess what, you're a debtor.

the thing that counts for a government is people's confidence that they won't default. needless to say, defaulting fucks that up. a lot.

[Britanania]

Because every other nation has a stake in the US. If the US defaulted, it would result in the collapse of the International Banking System, and the consumerist economy that governs world trade. Think the Great Depression on a far more massive scale. The only equivalent I can think of is the final days of the Roman Empire were the quality of life decreased and localisation occurred to the point that it took Europe a thousand years to truly recover

[San Lumen]

who cares about your company? the government is not a company. it is not a household either. stop comparing it to them.

it would really really really piss everyone off btw

so what? Why should we keep borrowing and going further and further into debt?

[Noraika]

Or we could base our tax structure and social welfare programs on the Nordic model, and probably, with our greater resources, run an even greater surplus. Or simply reform the tax structure and services to have less loopholes and less over-pricing due to profit margins, in basic services.

[The East Marches]

Gee I don't know, why don't we wreck the financial markets and commit suicide?

Its a bad idea, a very bad idea. You would be destroying our very system. Mass quality of life drops for seniors with pension funds that bought those treasuries, global financial meltdown, insert apocalyptic things here.

Edit: You are right that we are addicted to debt. Shocking the system is a poor way of going about it.

[San Lumen]

Or we could base our tax structure and social welfare programs on the Nordic model, and probably, with our greater resources, run an even greater surplus. Or simply reform the tax structure and services to have less loopholes and less over-pricing due to profit margins, in basic services.

I like that idea

[Benuty]

Gee I don't know, why don't we wreck the financial markets and commit suicide?

Its a bad idea, a very bad idea. You would be destroying our very system. Mass quality of life drops for seniors with pension funds that bought those treasuries, global financial meltdown, insert apocalyptic things here.

People thought the recession was bad?

Wait till this happens, and then we will talk.

[Noraika]

Or we could base our tax structure and social welfare programs on the Nordic model, and probably, with our greater resources, run an even greater surplus. Or simply reform the tax structure and services to have less loopholes and less over-pricing due to profit margins, in basic services.

I like that idea

Me too.

[Trotza]

Or why not just print all the money we need?

Germany tried that once after WW1, you can see how well that turned out.

[Quokkastan]

who cares about your company? the government is not a company. it is not a household either. stop comparing it to them.

it would really really really piss everyone off btw

so what? Why should we keep borrowing and going further and further into debt?

The debt isn't so big as a function of GDP. Japan has been operating under far greater debt for a far longer time, and seems to be operational. This is not as big of an issue as people like to make it out to be.

[Britanania]

so what? Why should we keep borrowing and going further and further into debt?

The debt isn't so big as a function of GDP. Japan has been operating under far greater debt for a far longer time, and seems to be operational. This is not as big of an issue as people like to make it out to be.

Admittedly Japan has bigger problems than its debt

[Benuty]

so what? Why should we keep borrowing and going further and further into debt?

The debt isn't so big as a function of GDP. Japan has been operating under far greater debt for a far longer time, and seems to be operational. This is not as big of an issue as people like to make it out to be.

God the people sure love sucking the issue dry to the point it has become mainstream.

[Benuty]

And the OP just left.

[Ngelmish]

You know, at the end of the Napoleonic wars, Britain's debt to GDP ratio was over 300%. That didn't stop them from being the preeminent superpower for the next century. Debt is not the determinative factor on a country's level, although it can contribute negatively depending on other circumstances.

But even if defaulting is your strategy to deal with it (a bad one) announcing it will only exacerbate the effects.

[Quokkastan]

The debt isn't so big as a function of GDP. Japan has been operating under far greater debt for a far longer time, and seems to be operational. This is not as big of an issue as people like to make it out to be.

Admittedly Japan has bigger problems than its debt

An aging workforce, a labor shortage, the fact that they are planted on a thousand giant geological timebombs, Godzilla, North Korea, and tentacle monsters.

[San Lumen]

And the OP just left.

No I didn't. What is your opinion of my OP?

[Benuty]

And the OP just left.

No I didn't. What is your opinion of my OP?

Just what exactly do you mean by going back to simpler times exactly?

[Greed and Death]

Why is it a moronic idea? And how to other nations count on our debt?

If we default it would essentially be economic suicide for both us, and other nations.

The debt ceiling allows the government to be held hostage on certain issues.

The govnerment to be held hostage by the govnerment in other words politics.

[The Liberated Territories]

If the government can just borrow money and never have to pay it back why bother having income tax? Or why not just print all the money we need?

Printing all of the money they need would do nothing. If the US government decides to replace all taxation with printing money, inflation would eventually take hold (the increase of the money supply and credit) and devalue the currency as much as necessary. Except this process tends to repeat itself.

In effect, it'd be replacing the income tax with an inflation tax. Although I'd argue this would be even more dangerous, because it's much easier to control taxes than it is to control inflation.